Baht poised to weaken further

The baht is expected to depreciate to around 33.80 against the US dollar this week, driven by a firmer greenback following the temporary pause in the US-China tariff war.

However, the Thai currency is expected to remain volatile.

Roong Sanguanruang, senior vice-president for global markets planning at Bank of Ayudhya (Krungsri), said the bank expects the baht to depreciate to a range of 33.00 and 33.80 per dollar this week due to heightened uncertainties.

On Monday, the United States and China agreed to reduce tariffs on each other for a 90-day period, which supported gains in both the dollar and the yuan.

Despite this development, heightened uncertainties remain and continue to weigh on baht volatility against the dollar.

Under the temporary agreement, the US will reduce additional tariffs imposed last month on Chinese imports from 145% to 30% over the next three months, while China will cut duties on US imports from 125% to 10%.

Ms Roong said the baht's depreciation is also being pressured by a decline in global gold prices, which recently corrected to around $3,200 per ounce, as the baht tends to move in tandem with gold more than other currencies.

The baht opened at 33.38 per dollar on Tuesday, sharply down from Friday's close of 33.02, breaking the resistance level of 33.30 and testing the key level at 33.50, according to the Global Markets Division of Krungthai Bank.

Poon Panitchpibun, a money market strategist at Krungthai Global Markets, said the baht's movement mirrored the strengthening US dollar, which has been buoyed by improved risk sentiment following the temporary US-China trade agreement.

"This development eased market concerns over a severe US economic slowdown and led to a scaling back of expectations for aggressive interest rate cuts by the Federal Reserve," he said.

Market participants anticipate only two rate cuts by the Fed this year, said Mr Poon.

Some analysts even revised their projection, pushing back the anticipated rate cut from the July meeting to December.

Over the past week, the Fed's cautious approach to rate cuts, combined with optimism over trade negotiations between the US and its key partners, as well as strong US economic data, contributed to the gradual dollar strengthening, he said.

"Given this scenario, we expect the baht to continue weakening to a range of 32.95-33.75 per dollar this week," said Mr Poon.

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